Investing beats cash ISAs three times over in one year

Savers looking to utilise their ISA allowance before the 2025/2026 tax-year ends in April will find stocks & shares ISA returns have outpaced cash ISAs over the past 12 months, according to the latest analysis by Moneyfactscompare.co.uk.

• The average stocks & shares ISA (individual savings account) fund experienced a growth of 11.22% over the past 12 months (February 2025 – February 2026). There have now been three consecutive years of positive growth returns.
• In contrast, the Moneyfacts average cash ISA rate returned 3.48% over the same period. The average return is down compared to the previous 12 months.
• Confidence remains a key divider for new investors, with Aviva revealing that 55% of consumers have no investments and 39% think it’s too risky to invest.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Stocks & shares ISAs have now outperformed cash ISA returns for a consecutive year. Over the past 12 months alone, investing in stocks & shares has returned three times more to savers than a cash ISA, based on average returns. This should be a wake-up call for those who fear investing, as cash returns have diminished. However, it is important to not rely on returns over the shorter-term when making longer-term investment decisions.

“It is going to take a lot more than positive returns to encourage an investing culture in the UK. Not every saver will feel confident enough to invest, but if they get good guidance, they can start small and slowly gain more knowledge to encourage them to increase their deposits. 

“Cash is considered a safe choice, but investing shows the gains that could be made over the longer-term. Granted, past performance is not guaranteed to be repeated, so short-term gains should not be a decision maker in isolation. The past year alone laid bare the importance of seeking advice before taking the plunge to invest, some sectors boom one year and perform badly the next but can bounce back.

“There is no denying that the rise in gold prices, and general demand over raw materials, like metal and oil, had a heavy influence on fund performance over the past year, with the top performing sectors, including Commodities and Natural Resources, returning 28.83%. The sectors to bounce back from negative returns over the previous 12 months include Latin America, returning 38.24% compared to -11.15% between 2024 and 2025, with high commodity prices, political changes and currency strength observed to boost the sector.

“Investing for longer to ride out any storms in the stock market is generally considered a wise choice, but savers need to feel encouraged to monitor their pots and consider seeking other funds if they are seeing consecutive periods of poor performance. Risk appetites can also change over time, some investors might want to move their pots from higher volatile funds, or even invest in ethical funds. Those who use investment platforms should also be encouraged to regularly review any management fees, as the most cost-effective choice can vary depending on the size of someone’s portfolio. Whether large or small, experienced and novice investors might need to shift their pots from a platform if they are unhappy with any new fee structure.

“The Government has been very vocal about the desire for more investment in the UK, and by April 2026, the Retail Investment Campaign is expected to be launched. The initiative is intended to raise awareness of the importance of investing to people’s future financial wellbeing and highlight the value of investing to the economy. Those intrigued to know how well UK fund sectors have fared over the past 12 months may be pleased to see the UK All Companies fund returned 13.72%, slightly higher than a year prior of 13.26%. 

“A cash ISA will continue to be an attractive choice for savers, particularly those moving up from being a basic-rate taxpayer to a higher-rate taxpayer. Fiscal drag is causing millions of savers to have their Personal Savings Allowance (PSA) halved, down from £1,000 in earned interest to just £500. ISAs will be an essential part of any saver’s portfolio to shield returns from tax, but many will need to revisit their cash ISA plans in the years ahead due to upcoming limit changes. Indeed, from 6 April 2027, savers will see their cash ISA limit reduced to £12,000, but those aged 65 and over will continue to be able to save up to £20,000 in a cash ISA each year. The intention of the cut is to drive consumers to invest more, but anyone concerned should seek advice in the first instance to see how this will impact them.”